Class InternalizationEngine

java.lang.Object

com.quantfinlib.crb.InternalizationEngine

public final class InternalizationEngine
extends Object

The internalize-or-route decision — the economics that justify a central risk book's existence. Every internalized unit of flow saves the street's spread AND market impact twice over (the client's execution and the eventual hedge), so:

• Risk-REDUCING flow (opposite sign to the book's net) is internalized up to the offsetting inventory, and the client is given back a share of the saved spread as price improvement — the book was going to pay to shed that risk anyway;
• Risk-ADDING flow is warehoused (internalized without improvement) only while the post-trade inventory stays inside the warehouse limit — beyond that it routes out, because a warehouse limit that yields to one more trade is not a limit.

Flows and exposures are in the SAME factor units (currency notional for EQ:/CCY: factors). Counters accumulate for the internalizationRate() the desk reports. Sign convention matches CentralRiskBook: the flow is what the book ABSORBS if it internalizes. Deterministic, single-threaded.

Nested Class Summary

Nested Classes

Modifier and Type	Class	Description
static final record	InternalizationEngine.Decision	Where one flow went, and what the client got for it.

Constructor Summary

Constructors

Constructor	Description
InternalizationEngine(double warehouseLimit, double improvementShare)

Method Summary

Modifier and Type	Method	Description
InternalizationEngine.Decision	decide(double bookNet, double flow, double halfSpreadBps)	Decides one flow against the book's current net on that factor.
double	internalizationRate()	Fraction of decided notional the book kept (0 before any flow).
double	internalizedNotional()
void	readState(DataInput in)	Restores counters written by writeState(java.io.DataOutput).
double	routedNotional()
void	writeState(DataOutput out)	Serializes the counters plus the configuration they were earned under.

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Constructor Details

InternalizationEngine

public InternalizationEngine(double warehouseLimit,
 double improvementShare)

Parameters:

warehouseLimit - max |inventory| the book will hold on a factor after absorbing risk-adding flow, > 0

improvementShare - fraction of the half spread returned to a risk-reducing client, in [0, 1]

Method Details

decide

public InternalizationEngine.Decision decide(double bookNet,
 double flow,
 double halfSpreadBps)

Decides one flow against the book's current net on that factor.

Parameters:

bookNet - the book's net exposure on the factor (signed)

flow - exposure change the book absorbs if it internalizes (signed, non-zero)

halfSpreadBps - the street's half spread for this risk — what internalizing saves, > 0

internalizationRate

public double internalizationRate()

Fraction of decided notional the book kept (0 before any flow).

internalizedNotional

public double internalizedNotional()

routedNotional

public double routedNotional()

writeState

public void writeState(DataOutput out)
                throws IOException

Serializes the counters plus the configuration they were earned under.

Throws:

IOException

readState

public void readState(DataInput in)
               throws IOException

Restores counters written by writeState(java.io.DataOutput). The configuration must MATCH: an internalization rate earned under one warehouse limit says nothing about a different one, so a mismatch throws rather than silently blending regimes.

Throws:

IOException